Satz v ACN 069 808 957 [2009] NSWSC 1459

New South Wales Supreme Court

CITATION : Satz v ACN 069 808 957 [2009] NSWSC 1459

HEARING DATE(S) : 14 December 2009 JURISDICTION : Equity Corporations List

JUDGMENT OF : Austin J

EX TEMPORE JUDGMENT DATE : 14 December 2009

DECISION : Leave to bring proceedings granted; order for inspection made.

CATCHWORDS : CORPORATIONS - administration - under deed of company arrangement - member seeks leave to bring proceedings for inspection of company's books, and (upon leave being granted) for order for inspection - relevant considerations

LEGISLATION CITED : Corporations Act 2001 (Cth) ss 198F, 247A, 290, 440D Uniform Civil Procedure Rules r 5.3

PARTIES : Neville Joseph Satz (Plaintiff) ACN 069 808 957 (Defendant)

COUNSEL : A P Cheshire (Plaintiff)

SOLICITORS : Morgan Lewis Attorneys (Plaintiff)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

AUSTIN J

MONDAY 14 DECEMBER 2009

5153/09 NEVILLE JOSEPH SATZ V ACN 069 808 957 JUDGMENT (Ex tempore, revised on 21 December 2009) 1 HIS HONOUR: By an originating process filed on 2 November 2009, the plaintiff, who is a shareholder of the defendant company seeks leave under s 440D of the Corporations Act to bring proceedings for inspection of books of the defendant company. Section 440D says that during the administration of a company, a proceeding in Court against the company cannot begin or be proceeded with except with the administrator's written consent or with the leave of the Court. The company in this case is a company under administration. Under a deed of company arrangement the company and its business and affairs are under the control of the administrators. 2 Where a s 440D application is made against a company in voluntary administration, the Court must bear in mind that the directors are required to comply with a strict statutory timetable, involving preparation of their report to creditors and convening the second meeting of creditors to consider it. That consideration does not arise in the present case for two reasons. First, the company is in administration under a deed of company arrangement, and is no longer in voluntary administration. Secondly, the relief that the plaintiff seeks to obtain in the proceedings for which leave is sought is in the nature of a one-off step to be taken by the administrator, rather than a substantial course of conduct that might interfere with the discharge of the administrator's other duties. The one-off step is simply to provide the plaintiff with access, for inspection and copying, of certain books of the company. 3 The administrator has been informed of the application, and an indication of his attitude is given in the affidavit of Bradley Grant Campbell, made on 1 December 2009. Mr Campbell is a solicitor employed by the plaintiff's solicitors. He deposes that a letter was sent to the administrator, Mr Hayes, on 15 October 2009, and on 4 November 2009 he had a conversation with Mr Hayes who told him that he had received the documents and remarked, "it does not worry me a lot". Mr Hayes continued, "I told Neville he can have access to the documents. What's this all about? Why do you need a court order? We spoke on Monday and I agreed to what you requested." Later in the conversation, when Mr Campbell pointed out he wanted access to back-up tapes, Mr Hayes said "fair enough". 4 Given the attitude of the administrator and the circumstances I have recounted, it seems to me obvious that leave ought to be granted. The administrator has had notice of the originating process and has chosen not to appear today. Upon the granting of leave, the plaintiff will seek the substantive relief in the originating process, that is an order for inspection and copying of books of the defendant. 5 The originating process refers to s 198F, 247A and 290 of the Corporations Act 2001 (Cth) and UCPR r 5.3. In oral submissions counsel for the plaintiff rested the application for relief on s 247A alone. Section 247A(1) says that on an application by a member of a company, the Court may make an order authorising the applicant to inspect books of the company, or authorising another person to do so on the applicant's behalf. The Court may make the order only if it is satisfied that the applicant is acting in good faith and that inspection is to be made for a proper purpose. 6 Evidence of the circumstances giving rise to the application and the purpose of the application are set out in the affidavit of the plaintiff made on 2 November 2009, and Exhibit NJS1. Having reviewed the affidavit, and in the absence of any challenge, I am satisfied, for the purpose of 247A(1), that the plaintiff is acting in good faith and that inspection is to be made for a proper purpose. The plaintiff wishes, in particular, to have access to some back-up tapes which will either confirm that certain documents not yet seen are in existence or make it clear that the documents do not exist. In all the circumstances, I shall make an order under s 247A. 7 The orders I shall make are: (1) The plaintiff has leave to begin and continue these proceedings. (2) The Court directs the defendant by its administrators to permit the plaintiff to inspect and make copies of the books of the defendant including but not limited to: (a) hard copy records; (b) electronic records and back up tapes; (c) books within the possession of Johnson Winter and Slattery. (3) The defendant pay the plaintiff's costs of the proceedings as agreed or assessed. **********